Monday, April 23, 2012

Is This What Peak Oil Looks Like?

Peak oil theory holds a static view of the world, and its models ignore price effects: lots of oil discoveries and high production mean that prices and profits wane, and incentives for further exploration decline. But ensuing oil shortages then restore these incentives. When incentives exist, the industry will continue to produce and is likely to produce even more.
Peak oil theorists also neglect the role of technological advances in oil production as a great multiplier. The history of the oil industry reflects an endless struggle between nature and our knowledge. Progress in technology allows both new discoveries and the increase in recovery rate needed to turn non-recoverable or hypothetical resources into recoverable reserves. _China Dialogue

In the real world, oil reserves are not static, but rather respond to changes in prices, technologies, alternative fuels and energies, and new discoveries. Peak oil has shown itself incapable of responding to real world conditions, which makes it more like a religion.

The market has now priced in declining oil prices at least through 2020. If "peak oil" dynamics are still at play, they are nowhere to be found on this futures curve. [see graph above]
_Forexpro

But no matter how many circles of doom may form around the perimeter, the main thrust of human nature has always been toward profit, growth, and life. These positive drives push technology and exploration forward, and open up new conceptual mindsets which are able to incorporate new forms of energy, fuels, and possibilities into a larger future vision.

Doom is fashionable among the effete elite in the media, politics, faux environmentalism, academia, and the many cults of the apocalypse. But the rest of us have work to do.